DST01200 - Overview of DST Liability
DST applies to groups that provide a digital services activity. Where the revenues received in connection with the digital services activities exceed the annual thresholds, the group must submit DST returns and may have to pay DST.
Digital Services Activity
The following three services are considered digital services activities for the purposes of DST:
- a social media service;
- an internet search engine; or
- an online marketplace.
Annual Thresholds
The annual revenue thresholds are:
- £500m of worldwide revenue from the digital services activities; with
- £25m of these revenues attributable to UK users (UK digital services revenues).
Annual Allowance
There will be an annual allowance on the first £25m of UK digital services revenues.
Rate of DST
DST will normally apply at a rate of 2% on UK digital services revenues above the annual allowance.
Alternative Basis of Charge
A group can also elect to calculate the liability using an alternative basis of charge provision. The alternative basis of charge will benefit groups making a loss or operating at a low margin on their UK digital services activity.
This election is voluntary and is applied against each digital services activity individually. For example, if a business has two in-scope digital services activities (e.g. an internet search engine and an online marketplace) it could choose to apply the alternative basis of charge to one, both or neither of these activities, but not in aggregate.
Under the alternative basis of charge, the DST tax rate is calculated by reference to the UK operating margin of the digital services activity. It will also ensure that where the UK digital services activity is loss making, no DST needs to be paid on revenues attributable to that activity.
Cross-Border Transactions
If a group makes a valid claim, its UK digital services revenues arising from qualifying online marketplace transactions are reduced by 50%. These are cross border transactions where the foreign user is normally located in a jurisdiction which applies a similar tax to DST.